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Politics : Foreign Affairs Discussion Group

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To: sylvester80 who wrote (187052)	5/22/2006 10:50:13 PM
From: Hawkmoon	Read Replies (2) of 281500

Btw, here's some more figures for you related to the decline of the DOW in comparison to other markets: India's market was down 10% today. It has fallen 20% since May 10th compared to the DOW losing less than 5% of its value. It's possible that much of the speculation in India is due to their love of everything gold (being a population with one of the largest per capita ownership of personally held physical gold jewelry). news.yahoo.com And here's something of additional interest: yahoo.reuters.com Foreign investors have poured billions of dollars into emerging markets for much of the past two years, stomaching greater risks in exchange for higher returns than those available in the United States and Europe. But now investors are leaving, worried that higher U.S. rates will siphon cash out of developing countries. Currencies across Latin America stumbled and stock markets in Brazil, Argentina, Mexico and Colombia fell over 4 percent during the day. The heightened volatility was triggered in part by the Federal Reserve's statement on May 10, which opened the door to further interest rate hikes that would curb faster inflation. And guess what higher US interest rates mean? A stronger US dollar. And a stronger US dollar means more demand for US government bonds. And when bonds get to a level where they risk an inverted yield curve (which I seem to recall might have happed temporarily in today's trading when it briefly fell below 5% on the 10 year treasury): finance.yahoo.com finance.yahoo.com newyorkfed.org The Fed funds rate is currently at 5%, which really makes it hard for banks to make money on loans, which means they will not be as ready to loan money. And the Hang Seng has gone from 17000 to 15800 in a very short period as well and will probably go lower: finance.yahoo.com And look at the Nikkei: finance.yahoo.com The interesting thing to watch will be the Shanghei markets, which tends to be more regulated with governmental meddling (as I understand it) than Hong Kong: finance.yahoo.com So overall, the bloodbath in the DOW is relatively minor (so far) compared to these overseas markets. What you seem to forget is that the US economy is still around 30% of total global GDP. So when we sneeze, they world catches a cold. When we catch a cold, the world catches economic pneumonia. Hawk

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